On 15 October 2021 the Dutch government published amendments to the 2022 Tax Package. Reference is made to our Tax Alert of 22 September 2021 for the main highlights of the proposed tax measures that are relevant for corporate income tax (CIT) payers doing business in or with the Netherlands. The most important announced changes to the 2022 Tax Package are as follows.
1. Increase of the higher corporate income tax rate
The higher CIT rate for profits exceeding EUR 395,000 will be increased from 25% to 25.8% as per 1 January 2022. The lower CIT rate for profits of up to and including EUR 395,000 will be 15% as per 1 January 2022.
The rate of the withholding tax on interest and royalties is linked to the higher CIT rare and will therefore also be increased to 25.8% on 1 January 2022.
2. Stricter earning stripping rules
The earning stripping rules will be made stricter per 1 January 2022. Under the current rules, the deduction of interest is limited, in short, insofar the interest excess (i.e. the amount by which the Dutch taxpayer’s tax deductible interest expenses exceed its taxable interest income) exceeds the higher of (i) 30% of the taxpayer’s EBITDA (carving out tax exempt income) and (ii) a safe harbor threshold of EUR 1,000,000. Based on the announced changes, the percentage of 30% will be lowered to 20% for tax years starting on or after 1 January 2022.
The explanatory notes to the draft legislation state that the announced changes would increase the incentive to demerge companies in order to avoid the application of the earning stripping rules. In order to counter such tax avoidance, two measures have been proposed: the introduction of a complex anti-abuse rule or a reduction of the threshold of EUR 1,000,000. The Dutch government will further assess whether or not such measures will be proposed in the coming period.
The possibility exist that the 2022 Tax Package will be subject to further amendments during the parliamentary proceedings. We recommend assessing whether your structure meets the current and future requirements. If you have any questions regarding the above, please do not hesitate to contact us.
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